A Florida federal court recently found that, despite a mold exclusion and anti-concurrent-cause provision in the relevant commercial general liability policy, an insured was entitled to defense and indemnity for claims relating to mold infestation. Empire Indem. Ins. Co. v. Winsett, et al., No. 4:06cv439-SPM/WCS (N.D. Fla. April 3, 2008).

In the underlying case, the insured apartment complex builder was sued by 56 tenants for failure to complete the construction of the building and its promised amenities on time, misrepresention concerning the presence of mold in the apartments, and negligence based on the insured’s construction of the apartment complex without a vapor barrier (which purportedly resulted in the mold).

At issue in the coverage dispute was whether the insurer had a duty to indemnify and defend the insured in connection with the underlying lawsuit under its CGL policy, which contained a mold exclusion and an anti-concurrent-cause provision. Although the court noted that the underlying claims against the insured sought damages related to mold, it nonetheless found that the insured was entitled to a defense under its policy because “despite the mold exclusion, these claims are covered because the allegation that [the insured] negligently failed to construct [the apartment complex] with a vapor barrier is a construction defect that is a covered occurrence and the efficient proximate cause of the renter’s mold damage.” The court further found that the policy’s anti-concurrent-cause provision did not preclude coverage because the insured’s failure to install a vapor barrier and the resulting mold were not “independent” causes of the renters’ damages. To the contrary, because the insured’s failure to install a vapor barrier and the resulting mold were “dependent” causes of the renters’ damages -- i.e., the lack of a vapor barrier “instigated or set in motion the mold growth, leading to the renters’ damages”--the policy’s anti-concurrent-cause provision did not preclude coverage.

Based on this analysis, the court held on summary judgment that, despite the policy's mold exclusion and anti-concurrent-cause provision, the insured was entitled to defense and indemnity on the renters’ damages mold-related claims because the negligent failure to install a vapor barrier was a covered construction defect that was the efficient proximate cause of the renters’ damages.